Homeowners: Are You Sure You Own the Land Under Your House?

It’s your first house, in an older neighborhood.

You’re proud of the price you negotiated. What you don’t know is that you own only the house, not the ground under it. A nasty shock, to be sure. However, it’s entirely possible if you live in Maryland, Pennsylvania, Louisiana, or Hawaii.

These four states are home to peculiar laws referring to ground rent, where the individual owning the house must pay the landowner annually to live on the ground under the structure. This type of rent is actually a form of a lease in which unimproved land is rented for a long term for purposes of improvement by you, the home owner.

The concept of ground rent actually dates back to Roman times. It also played a significant role in English law. In the eighteenth century, it was a way of keeping initial housing costs low. A house could be under construction and already sold to an owner before the first payment for ground rent was even due. In the United States, the typical amount due is around $100 a year.

For some home owners, finding out they owe ground rent comes only after someone hands them the keys to the house. Consider the case of Baltimore homeowner Diana Watson, 54. Disabled because of asthma and chronic arthritis, she was forced to temporarily vacate her home after a fire. Once she fell six months behind and owed the landowner $48.00, she had to fight an ejection, a legal proceeding during which the ground rent holder actually takes possession of the building and any other property on the land. To settle, she also had to pony up a $450.00 fee to the landowner’s lawyer.

According to the Baltimore Sun, deeds to more than 500 homes went over to the ground rent holders in Baltimore Circuit Court between the years 2000 and 2006. Due in part to a ground rent series the newspaper ran, Maryland Gov. Martin O’Malley signed into law in March a ban on new ground rents on Maryland. At the same time, the state’s General Assembly worked on legislation to phase our existing ground rents and to make sure the system could no longer be utilized to grab the houses of unsuspecting homeowners.

A concept related to ground rent and a little more common in the United States is buying and selling mineral rights. In a recent Tennessee case, residents discovered they did not own the mineral rights to the mountain where they lived. However, since coal mining in the area had ceased long ago, they weren’t very concerned. What they intended to due was use plain rock from the mountain to build their houses, chimneys, and fences. It became an issue. Guesstimates are that up to half the landowners in Tennessee don’t own the mineral rights on the land on which they reside. Similar problems occurred in Pennsylvania regarding methane gas rights.

How do you find out who your ground rent landowner is? If the seller didn’t disclose it, researching the title to the property should provide it. At closing, your title company or settlement attorney might have the information. If not, check with the recorder of deeds for your county. However, some of these records are very, very old, and the contact information can’t be located. Rest assured that if the landowner wants to be paid, eventually he or she will be looking for you.

If you bought a property already identified as having ground rent but can’t locate this individual, your mortgage company might want to escrow the annual amount. In Maryland, collection of back rent is limited to three years’ worth. If you’ve lived on the property for five years and the landowner suddenly appears, asking for five years of rent, you’ll owe it for only three.

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